Is the inclusion of freight in a reverse auction equal to the net landed cost?
The simple answer is no, and quite often this can be the most complicated part of any e-bid, reverse auction or traditional procurement process.
Sourcing freight lanes or shipping lanes is a project all its own. A shipping lane simply put is the general movement of products between two areas. The first is the departure area and the other is the arrival area. This gets more complicated when we start to discuss full loads versus less than full loads and haul back opportunities that accomplish the optimum in a transportation cost model.
When you structure your reverse auction, simply asking for a net landed cost or assuming that means free freight or free freight within a certain radius of the origination point is just not that easily accomplished.
By example, I’ve seen companies include language in their Terms and Conditions that state all freight must be free for the first 500 to 1000 miles. This can work to reduce freight charges, but the rest of the event needs to be set up very carefully or you just end up robbing Peter to pay Paul.
If you really want to understand your net landed cost, then you should have line items in your event that are specific, measureable and bid on separately. When a company says they want a net landed cost what they are referring to is the cost of a product or products plus all of the relevant logistics costs, such as transportation, warehousing, handling etc. In other words, what’s my cost when it gets here or where we want it?
If you want to drive the best pricing and service possible you need to understand what you are asking for and make sure it is clear in your specifications and terms and conditions.
If you’d like to learn more about reducing your total inbound and outbound shipping costs, please contact a SafeSourcing customer services account manager.
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